Characterizing the Financial Cycle: Evidence from a Frequency Domain Analysis

35 Pages Posted: 21 Jun 2016

See all articles by Till Strohsal

Till Strohsal

Free University of Berlin (FUB) - Division of Economics

Christian Proano

Bielefeld University

Jürgen Wolters

Free University of Berlin (FUB)

Date Written: 2015

Abstract

A growing body of literature argues that the financial cycle is considerably longer in duration and larger in amplitude than the business cycle and that its distinguishing features became more pronounced over time. This paper proposes an empirical approach suitable to test these hypotheses. We parametrically estimate the whole spectrum of financial and real variables to obtain a complete picture of their cyclical properties. We provide strong statistical evidence for the US and slightly weaker evidence for the UK validating the hypothesized features of the financial cycle. In Germany, however, the financial cycle is, if at all, much less visible.

Keywords: Financial Cycle, Business Cycle, Indirect Spectrum Estimation, Bootstrapping Inference

JEL Classification: C22, E32, E44

Suggested Citation

Strohsal, Till and Proano, Christian and Wolters, Jürgen, Characterizing the Financial Cycle: Evidence from a Frequency Domain Analysis (2015). Bundesbank Discussion Paper No. 22/2015. Available at SSRN: https://ssrn.com/abstract=2797045

Till Strohsal (Contact Author)

Free University of Berlin (FUB) - Division of Economics ( email )

Boltzmannstr. 20
Berlin 14195, 14195
Germany

HOME PAGE: http://www.wiwiss.fu-berlin.de/fachbereich/vwl/nautz/mitarbeiter/Strohsal/index.html

Christian Proano

Bielefeld University ( email )

Universitätsstraße 25
Bielefeld, NRW
Germany

Jürgen Wolters

Free University of Berlin (FUB) ( email )

Van't-Hoff-Str. 8
D-10785 Berlin, Berlin 14195
Germany
+49-30-838-2014 (Phone)
+49-30-838-4142 (Fax)

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